The House of Representatives has approved a $700 billion bailout package for US banks, under pressure from all sides as the effo
rt to head off a spreading financial crisis hung in the balance. ( Watch ).

The House approved the financial rescue plan by a vote of 263-171, sending the measure to President George W. Bush and concluding two weeks of legislative haggling in Congress that had roiled and captivated global markets.

Wells Fargo & Co stepped in to buy Wachovia Corp, a bank badly hobbled by the credit crisis, providing a rare bit of positive news for the financial sector and sending markets higher.

In new signs of spreading crisis, California said it was running out of money, France said the world stood on the "edge of the abyss" and European leaders were divided over their own response to the global crisis.

The House had shocked world markets on Monday by rejecting a previous draft. With elections on November 4, lawmakers from both parties were wary of voter backlash in asking taxpayers to pay for Wall Street's mistakes.

On Friday, speaker after speaker from both parties said rejecting the bailout could have devastating consequences for an already slowing US economy, arguing the bill was as important for small businesses, homeowners, students and pensioners as it was for the financial sector.

"While the focus has been on the Dow Jones and Wall Street, we are addressing the real pain felt by Mr. and Mrs. Jones on Main Street," said House Speaker Nancy Pelosi, a California Democrat.

Said House Republican leader John Boehner: "We have to act, and if we do not this crisis is likely to worsen and put us into an economic slump like many of us have never seen."

The bill would allow the Treasury to buy toxic debt from U.S. banks, which many economists said is needed to head off the worst financial crisis since the Great Depression.

U.S. stocks rose on hopes for the bailout plan and the deal to buy Wachovia.

Wells Fargo, one of the strongest U.S. banks, said it didn't need the government help that Citigroup Inc required in an earlier effort to rescue Wachovia.

The dollar continued to rally against the euro and European stocks rose about 3 percent.

Earlier on Friday, the United States reported its biggest monthly job loss in 5 1/2 years, more evidence of an approaching recession. Data showed the U.S. services sector holding up.

"The data has been horrible all week long. It absolutely does put pressure on them to get this rescue act passed," said Fred Dickson, market strategist at D.A. Davidson and Co in Lake Oswego, Oregon. "It's a bill with risks, but it's a plan and the market needs a plan."

In California, Gov. Arnold Schwarzenegger warned the U.S. Treasury the state may need short-term federal loans because it can't raise money in frozen credit markets.

A collapse in the U.S. housing market and resulting bad mortgages have shattered confidence in the financial sector, with banks across the United States and Europe needing support from governments or outside investors this week.

Interbank lending and credit to businesses and private individuals has all but seized up. Central banks have injected billions of dollars to maintain some flow of funds.